With higher returns, P2P lending is attracting a large number of millennials – 60% of the lenders on the platform are less than 35 years old, according to a report by Faircent.com, online peer-to-peer lending platform.
Faircent.com has released its Research and Analytics Report for Q1 2017 with insights drawn from key trends on the platform with respect to lenders, borrowers, and the overall performance of loans as of April 2017.
Lenders are investing more and those with investments worth more than INR 5 lakhs are earning gross returns upwards of 22% per annum with the lowest volatility of returns. Significant increase in timely repayment has led to increase in reinvestment of returns back on to the platform leading to further increase in returns.
Vinay Mathews, Founder and COO, Faircent.com, commented on the report, “Our Q1 report is aimed at providing current and future lenders associated with Faircent.com with a much better understanding of the online P2P lending landscape. This will help them make the most appropriate investment decisions according to their risk appetite and return expectations. Insights gained from key consumer trends and behavioural patterns will also help in creating better and more relevant products.”
Based on the investment behavior of lenders on Faircent.com, some strongly validated trends are:
· Almost 90% lenders on the platform earned a gross return of 18% to 26% per annum.
· Volatility of returns was highest for lenders who had invested up to INR 1 lakh, and reduced significantly as the investment amount increased. Lenders investing more than INR 5 lakhs had minimal volatility of returns.
· 35% of the borrowers were between the ages of 30 to 34 years, 30% between the ages of 25 to 29 years, and 5% between the ages of 20 to 24 years. Only 10% of the borrowers were above the age of 40.
· Single women borrowers made the timeliest repayments.
Millennials are the most active lender and borrower demographics
Most lenders on the platform were young, with 51% belonging to the age bracket of 30 to 39 years. About 36% of lenders were over 40 years, while 13% were below the age of 30 years. A similar trend was evident among borrowers as well, with nearly 75% borrowers listed on the platform falling in the age group of 25 to 34 years. The report also identified younger borrowers as the most responsible segment when it came to repayments, with lower payment default rates than the platform average.
Repayment trends and reinvestment benefits
Reinvestment of returns by lenders was observed to reap great dividends; platform lenders with a reinvestment ratio above 100% generally registered net annualised returns upwards of 25% pa, thanks to greater compounding and portfolio diversification.